Government Bond Investors Shun Size in Favor of GDP

By Michael Aneiro

With developed countries piling on debt, big investors are increasingly looking beyond size when deciding on government bond benchmarks, and turning away from Treasury bonds in the process. Bloomberg’s Alexis Leondis and Lisa Abramowicz report today:

Norway’s $702 billion sovereign-wealth fund and Pacific Investment Management Co. are starting to shift to indexes that favor less-indebted nations with growing gross domestic product, such as Brazil and South Korea. Pimco boosted the proportion of Mexican holdings while trimming the percentage allocated to U.S. issues in its biggest exchange-traded fund. BlackRock Inc. (BLK), the world’s largest money manager, with $3.8 trillion in assets, has $3 billion tied to a gauge based on credit-worthiness rather than capitalization.

The move away from market-size benchmarks that guide at least $9 trillion in fixed-income investments may raise borrowing costs for industrialized nations and curb those for developing economies. Bonds from the Group of Seven countries underperformed the global government debt market last year by the most on record.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.